More Property Cooling Measures Announced

SINGAPORE: The Singapore government on Friday announced additional measures to cool the property market.

The measures, which will take effect on January 12, include higher buyer’s stamp duty, tighter loan-to-value (LTV) limits, higher minimum cash downpayment for second and subsequent housing loans, as well as an introduction of seller’s stamp duty for industrial properties.

The package of measures is the seventh round of property cooling measures introduced since 2009.

Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam said it is the most significant set of measures undertaken by the government so far.

The government said previous measures had helped to dampen speculative buying, but demand for residential property remained firm and prices have continued to rise.

Mr Tharman said investment demand from Singaporeans has been strong and those who are buying their second or more property accounted for half of the buyers for new units in the private residential market.

He added: “I would say prices are running away from the fundamentals. Had we not intervened previously, I think we would be in serious trouble now, we would be in a real bubble now.

“But what we are seeing is a continued gradual rise in prices and we don’t intend that to continue because it will only be that you get a more serious fall further down the road.”

The measures tighten property ownership for investment, as well as on foreign buyers, the government said.

To discourage over-borrowing, financing conditions for housing have also been tightened.

In addition, structural measures have been implemented to strengthen the policy intent of public housing and executive condominiums.

The government said the additional buyer’s stamp duty (ABSD) will be increased between 5 and 7 percentage points across the board.

The ABSD will now be extended to permanent residents buying their first residential property and on Singaporeans buying their second residential property.

Permanent residents will have to pay a 5 percent stamp duty on their first property, and foreigners 15 percent.

For Singaporeans, they will have to pay an additional stamp duty of 7 percent for their second property.

Potential buyers who already have at least one existing loan will also have to pay more cash upfront for their purchases and face tighter loan-to-value limits.

The minimum cash downpayment for individuals applying for a second or subsequent housing loan will be raised from 10 percent to 25 percent.

The government said the new ABSDs and loan rules are temporary and will be reviewed in future, depending on market conditions.

To further moderate the demand for HDB flats, the government has also introduced several new measures.

It will tighten eligibility for loans to buy HDB flats. The Mortgage Servicing Ratio (MSR) for housing loans granted by financial institutions will be capped at 30 percent of a borrower’s gross monthly income.

For loans granted by HDB, the MSR cap will be lowered from 40 percent to 35 percent.

To target the increasing number of permanent residents (PRs) buying property in Singapore, there will be an owner occupation requirement for those who buy resale public housing.

Permanent residents who own an HDB flat will not be allowed to sublet their entire flat. Currently, there are about 2,300 PRs subletting their whole flat.

PRs who own an HDB flat must also sell their flat within six months of purchasing a private residential property in Singapore.

National Development Minister Khaw Boon Wan explained that this is because the privilege of buying subsidised flats should be kept for owner occupation.

There are also new measures to ensure that executive condominiums (EC) remain affordable for middle-income Singaporean families.

The move follows a recent trend by developers building super-sized ECs and selling them for millions of dollars.

Measures to address this include capping the maximum strata floor area of new EC units at 160 square metres and ensuring that sales of new dual-key EC units be restricted to multi-generational families.

Developers of future EC sale sites from the Government Land Sales programme will only be allowed to launch units for sale 15 months from the date of award of the sites or after the physical completion of foundation works, whichever is earlier.

Private enclosed spaces and private roof terraces will be treated as gross floor area (GFA). The GFA of such spaces in non-landed residential developments, including ECs, will be counted as part of the “bonus” GFA of a residential development and subject to payment of charges.

Mr Khaw said: “Hitherto the ECs units, size and pricing have been quite moderate and very much in keeping with what the market think, the target buyers can afford.

“But when they start exceeding 200 square metres and charging a couple of million dollars, one should legitimately ask how can a $12,000 income group, family afford such a unit.”

“So I think the best way to do so is what we have included in this package — which is, once you limit the size of the EC that developers can build, that automatically will bring the price down,” the minister added.

For the first time, the government has also introduced a seller’s stamp duty (SSD) on industrial property to discourage short-term speculative activity which could distort prices and raise costs for businesses.

The SSD will apply to industrial properties and land bought and sold within three years of purchase.

A rate of 15 percent will be imposed on industrial properties sold within the first year of purchase. This will go down to 10 percent for those sold in the second year of purchase, and to 5 percent for those sold in the third year of purchase.

Finance Minister Tharman said authorities are not trying to engineer a market crash. The measures are designed to calm the market, so some of the temporary cyclical ones will be reviewed if things turn around.